I want to give a plug to the Sixth Annual Chicago Forum on International Antitrust Issues being held Monday, June 8-Tuesday, June 9, 2015 at the Northwestern School of Law. I have been to this program in the past and it is excellent. And, this year my partner, Hays Gorey, Jr, is a speaker on one of the panels.

The featured speaker is Brent Snyder, Deputy Assistant Attorney General for Criminal Enforcement, Department of Justice, Antitrust Division. His topic is: “The Proliferation of Leniency Programs: Is Leniency Still an Offer Companies Should Not Refuse or Too Much of a Good Thing?”

There are many panels covering a range of international antitrust issues.  Mr. Gorey will be on this panel:

Cascading Cartel Investigations — How to Recognize and Minimize the Risk

Recognizing and minimizing the risk may require proactive techniques to detect antitrust violations and to obtain leniency from the Department of Justice and other antitrust enforcement agencies.

• Darrell Prescott, Partner, Baker & McKenzie LLP (moderator)
• Hays Gorey, Jr., Partner, GeyerGorey LLP
• Kurt Haegeman, Partner, Baker & McKenzie LLP, Brussels
• Britt M. Miller, Partner, Mayer Brown LLP
• Dr. John Scalf, Senior Consultant, NERA Economic Consulting

The program covers the latest developments in competition regulation around the globe providing practitioners and regulators with up-to-date and practical information. The full agenda can be found here.

Thanks for reading.

Today we have an update from Brazil by Mauro Grinberg, a former Commissioner of CADE, a former Attorney of the National Treasury and senior partner of Grinberg Cordovil.

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A Resolution issued by Conselho Administrativo de Defesa Econômica (CADE), dated March 11, 2015, made a comeback of the procedure for antitrust guidance to be requested to CADE. This request for guidance can be used in all competition cases, including cartels.

The first article of such Resolution says that any interested party can forward a request for guidance to CADE, related to specific situations, which may be real or potential. Interested parties can also be trade associations which have, as their goals, representation of the involved sector and can demonstrate that at least one of the represented companies is legitimately interested in such guidance.

There are some requirements for such request for guidance and, although it is pointless, for the purpose of this note, to go through all of them, it is interesting to mention that the party must declare all CADE´s precedents related to the object. So, no request for guidance can be asked before a thorough research through CADE´s jurisprudence. However, any research may have its problems and it is not clear what will happen if a certain research does not present a decision that CADE may understand as fundamental.

Another point that must be reported says that the request for guidance cannot refer to a purely hypothetical issue. This may be a somewhat tricky question because CADE may understand that a question that is not under practice is hypothetical (which, in a way, it may be). It is not clear what can happen if, e.g., a party asks whether it is legitimate to have certain contacts with competitors and, if the conduct is approved by CADE and the party does not perform it due to a further strategic and/or commercial decision, could the party can be punished for having submitted a request for guidance that CADE may consider hypothetical?.

The answer to the request for guidance is binding for CADE and the parties for five years, although the Resolution states that CADE can reconsider its decision, if based on new facts. So, in practice, the Resolution is really binding only for the parties submitting the request for guidance.

A last problematic article states that, if CADE understands that an already existing conduct, which is the object of the request for guidance, has the possibility of being illegal, an administrative file will be opened in order to prosecute the interested party. If the conduct is a possible cartel, a criminal file may also be opened. So, it is fundamental that, in case a party wants to make such request related to a conduct that is under way, it is advisable to stop such conduct before requesting the guidance.

Consequently, a request for guidance, in order to be in the safe side, must be related to conducts that are not being performed but are to be performed and depend on the guidance, with the additional task of demonstrating to the authorities that the request for guidance is not hypothetical.

Mauro Grinberg is a former Commissioner of CADE, a former Attorney of the National Treasury and senior partner of Grinberg Cordovil.

Today’s guest blog post is from Kelly-Ann Semper who recently attended the ASEAN ANTITRUST: THE FUTURE OF COMPETITION LAW & POLICY IN ASEAN COUNTRIES, sponsored by ESSEC+Sorbonne-Assas International Law School and Concurrences Journal. The conference was held in Singapore on Thursday, April 23, 2015. Ms. Semper’s helpful report is on the panel: “CARTELS AND LENIENCY APPLICATIONS IN THE ASEAN COUNTRIES.”  The report also contains many useful links.

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The panellists on the “Cartels and Leniency Applications in the ASEAN Countries were:

LEE Jwee Nguan – Director, Legal, Competition Commission of Singapore

Dhaniah AHMAD – Head of Legal, Malaysia Competition Commission, Kuala Lumpur

John DAVIES – Head, Competition Committee, OECD, Paris

Börries AHRENS – Partner, White & Case, Hamburg

Laurence IDOT – Professor, University Paris II Panthéon-Assas and Member of the Competition Authority, Paris

Chair: Dominique LOMBARDI – Lecturer, University Sorbonne-Assas, Singapore

By far the liveliest presentation of the day, due in no small part to the subject matter and the eloquence of the speakers (including the chair), this section of the conference did not (as the title indicates) limit its coverage to the ASEAN region. Anyone hoping for a detailed discussion of cartels and leniency programs in the ASEAN region may have been disappointed, with the main contributions coming only from the CCS in Singapore (more information about the CCS can be found here) and the MyCC in Malaysia (more information about the MyCC can be found here). Other contributions came from practitioners and experts on the US, the EU, France, Germany and Mauritius.

The main topics of discussion were: (1) What exactly is a cartel? (2) Leniency programs – what are they, what should they be, and are they effective? and (3) Co-operation between competition agencies – is there enough of it?

Cartels

Although reference was made to the definitions set out in the 1998 recommendations by the OECD (further information on this can be found here) some participants noted that ‘modern-day’ cartels are less sophisticated in some ways than their 1990s’ counterparts, resulting in current enforcement against behaviour at the outer limits of what could be considered cartel behaviour, such as information sharing. Participants noted that cartel definitions in competition legislation tended to be inclusionary, i.e. not limited to the behaviours listed, leaving room for flexibility when competition agencies are faced with new or more subtle forms of cartel behaviour. The special case of Malaysia was noted: illustrations of cartel behaviour set out in the Malaysian Competition Act (the text of which can be found here)  are limited to hard-core type cartels only. Participants agreed that a more open and flexible definition of cartels is the best approach, pointing to one particular downside of a rigid focus on hard-core cartels – a tendency on the part of leniency applicants to ‘exaggerate’ their evidence to ensure that they fall within the leniency program – which is not beneficial to anyone, not even the applicant.

Leniency

A fairly recent tool in the arsenal of competition enforcement, leniency was by and large considered to be an essential and important instrument. The participants pointed to evidence suggesting that in the more mature jurisdictions (the US and the EU), leniency applications now account for the huge majority of cartels brought to the authorities’ attention (up to 90%), and have brought down the length of investigations by 1 ½ years. Despite this, there remains the chicken and egg conundrum of whether leniency itself was the cause of these cartels being brought to light, or whether such cartels were fundamentally unstable and would have been discovered in any event. One participant suggested that although there is very clear and strong evidence that the introduction of leniency has led to an increase in cartel deviation, cartels (and their life-spans) continue to be based mainly on economic considerations (i.e. whether or not it is profitable for the members to continue). The pertinent question is therefore whether leniency programs are only responsible for catching weaker cartels, or cartels that were on their way out anyway. If this is indeed the case, then there is the worrying spectre of the strongest and most profitable cartels continuing undetected, with business as usual, despite the massive injection of resources by agencies, which have placed cartel enforcement at the top of their agendas.

As a newcomer to the scene of competition enforcement, Malaysia is a somewhat different case. So far, due mainly to lack of awareness in the business community, cartel behaviour has not been outed by the establishment of a leniency program. Rather, cartels themselves have unwittingly committed flagrant breaches of the rules – one example given was the publication by one cartel of its own anti-competitive agreement.

Of course, a major risk of leniency programs is the potential for complacency on the part of the agency – why bother to spend limited resources on investigations etc. when leniency applicants present all the required evidence to you on a silver platter? Limited resources also present another risk in that increasing numbers of leniency applications make it that much harder for agencies to focus energy and time on ex officio investigations. Again, this leads to the danger of the strongest, most stable, cartels continuing to escape detection. The novel approach of the CCS in Singapore was highlighted: (i) the establishment of a reward scheme, whereby complainants may receive a monetary reward (up to SG$120,000) and their identities remain confidential (more information on this can be found here; and (ii) the engagement of a consultant to identify specific sectors of the economy which may be more prone than others to cartel behaviour, potentially followed by a wholesale market review or simple monitoring of behaviour by the CCS in such sectors.

Despite the acknowledged importance of leniency as a tool in cartel detection and enforcement, participants agreed that there are other useful tools, including ex officio investigations, monitoring of particular economic sectors, and hotlines for complaints. Indeed, it was pointed out that the majority of leniency applications in the US and the EU were only made after investigations by the relevant antitrust agency had already commenced, although this could be partially explained by such systems allowing multiple leniency applicants.

The perspective of businesses, often neglected, was addressed – leniency provides more commercial certainty for them as it complements their compliance programs (assuming of course that such programs actually work in practice!), and the resulting decrease in fines are welcomed. However, the downside to this, as experienced in Germany, is the tendency of leniency applicants to exaggerate their evidence (and the anti-competitive nature of their conduct) in order to ensure a successful application. One member of the audience challenged the magnitude of this risk in practice in the context of follow-on litigation, but conceded that short-term, more tangible objectives (obtaining immunity or a reduction in fines) often outweigh long-term objectives (avoiding costs from potential follow-on damages actions).

Participants also touched on the mechanics of dawn raids and the protection of confidential information (most agreed that there were a variety of options for keeping leniency application information confidential, but these usually do not extend to protecting identity).

Co-operation

The participants discussed the current mechanisms in place for inter-agency co-operation, such as the sharing of information once waivers are obtained from leniency applicants (in cases where applications have simultaneously been made in multiple jurisdictions). Participants foresee the eventual convergence of leniency systems globally over time (given that such systems are still relatively young).

In the ASEAN context, there is already a degree of co-operation taking place, in the form of regional conferences, annual meetings of an informal network of enforcement heads, and information sharing on an ongoing basis. Participants also mentioned that the ASEAN experts group on competition (further information about this group can be found here) is used as a platform to exchange information and share ideas.

Joint investigations and enforcement action are still on the agenda, but with so many member states only at a nascent stage of enacting or implementing competition legislation, it is unlikely that this will come to fruition very soon.

The participants briefly discussed the OECD recommendations to reduce inconsistencies in leniency systems (for the text of this, please see here), and proposals for introducing a global marker system. Suggestions falling shy of a global marker system and complete alignment in leniency systems included international and/or regional co-operation, alignment of the period between submitting and perfecting a marker, and alignment of the methods used to protect confidential information.

Impressions from the panel discussion

Despite the sometimes debative nature of the panel discussion, it seems the panelists were mostly agreed on the current state of cartel enforcement and leniency programs around the world: leniency is undoubtedly an essential tool in cartel enforcement, but it should not be the be-all-and-end-all of enforcement tools or lead to complacency on the part of agencies. Two major concerns highlighted by the group are (i) the likelihood that stronger and more stable cartels are evading detection, and (ii) the urgent need for more inter-agency co-operation and alignment of processes, in order to reduce inconsistencies around the globe.

Unfortunately, perhaps due to the relatively embryonic stage at which many ASEAN nations find themselves in the antitrust sphere, there was little discussion surrounding ASEAN-specific issues. However, do watch this space as member states gear up to fulfil their commitment to introduce competition policy and law by the year-end.

Kelly-Ann Semper

The ABA Antitrust Spring Meeting wrapped up last Friday in Washington, D.C. The program was extensive, covering all aspects of competition law as well as some consumer protection issues.   I try to attend some of the non-cartel programs because I don’t get a chance to follow those issues as closely in my regular practice. A particularly interesting program—Hot Topics—covered many cutting edge issues in health care such as “pay to play,” product hopping and health care related mergers. And, of course, much of the time at the Spring meeting is catching up with old friends from around the world and meeting new ones.

Even just on the cartel front, the breadth of topics was deep and I did not attend every cartel related program. But, I did want to pass on a few items that I found interesting and thought others might as well.

• Attorney General Eric Holder spoke at the Spring Meeting.

After noting the Division’s impressive statistics during his tenure, the AG remarked: “I expect there will be more significant news on the criminal side in the next few weeks.” Bill Baer, Assistant Attorney General for the Antitrust Division, remarked: “I want to assure you that right after this meeting ends I’m going to go back to the office and call him to find out what he thinks is coming.”   I’ll hazard a guess in one area: there could be criminal indictments against companies and individuals in the Forex investigation. I base this on the fact that it would be a notable achievement for Holder who has sometimes been criticized for settling cases for big $$ against the financial institutions, but not holding individuals accountable. Also, the conversations in Forex related chat rooms using names like the “cartel club” and “the bandits club” would certainly invite individual prosecutions. Finally, some of the Forex conduct under investigation took place after the Libor prosecutions had begun, another fact that could prompt ratcheting up the level of prosecutions against both individuals and recidivist corporations.

• The FTAIA Commands Attention

The FTAIA was the specific focus of one program led by Mark Rosman:  “Through the Looking Glass: When ‘Direct’ Means ‘Indirect'” but the FTAIA was spoken about in several panels. There were some interesting statistics provided about the extent of international cartel prosecutions: from 1997 to 2012 the Antitrust Division imposed 123 fines of over $10 million, and of these, 107 were imposed on foreign companies. Similarly, of the $7.8 billion in fines imposed during that period foreign companies paid 97% of the fines. But, the Antitrust Division noted two facts that put these numbers in context. First, 75% of multi-national companies are non-US based and volume of commerce is main driver so its logical that largest fines come in international cartel cases. Also, Division officials emphasized that almost all of these fines involved direct commerce.  The price-fixed product was shipped directly into the United States. When I was with the Division, every international cartel investigation I worked on involved direct commerce. Because of this, the FTAIA to date has had little effect on the Division’s international cartel enforcement program.  Still, the Division has an intense interest in the development of case law concerning the FTAIA because it wants to preserve the option to bring a “components” based case in the right circumstances.  The Division’s Appellate Section was involved in three recent FTAIA related cases. One, of course was AU Optronics, which was an Antitrust Division prosecution that involved both direct import and component (i.e. FTAIA) commerce. The Division also filed amicus briefs in Lotes in the Second Circuit and Motorola Mobility in the Seventh Circuit.

• Double Counting.

Brent Snyder, the Deputy Assistant Attorney General for Criminal Enforcement addressed the concern about double counting, a concern of defendants that they are being punished in a fast growing number of jurisdictions for the same conduct. While Snyder acknowledged “if another jurisdiction imposes a fine, we are not obliged to take that into account,” he added “the vast majority of the cases that we bring, our fines are calculated using direct U.S. imports.” Jon Pecman, Canada’s Commissioner of Competition, noted that while enforcement agencies have a high-level of “pick up the phone” cooperation on the front end of investigations; there could be better communication at the back end in determining a fine.  If early jurisdiction, usually the US, impose a fine without taking into account what a corporate defendant may have to pay later, there may be a problem of not enough money to go around (or from the defendant’s point  of view, too many hands seeking too much money.)

• Compliance Monitor

Brent Synder also commented on the Division’s discretion to seek a compliance monitor as a part of a corporate defendants’ sentence.  Snyder has previously addressed the subject in speeches and noted that the Division may seek a monitor if circumstances indicate there is an increased risk of recidivism. These factors can include whether the company has refused to accept responsibility; whether the company has taken steps to implement an effective compliance and ethics program;  and whether the company continues to employ high level executives who the Division believes were involved in a cartel but have not accepted responsibility.  Any one factor, or a combination of factors may lead the Division to seek a compliance monitor.

• AU Optronics Probation Hearing

AU Optronics was convicted of participating in the LCD price-fixing cartel. As part of the company’s sentence, it was placed on probation and ordered to implement an effective compliance and ethics program.   (Oh yeah, and fined $500 million too.) This was the first time the Division sought a compliance monitor for a corporate defendant.  The probation officer in the case petitioned the court to hold a probation violation hearing stating “We have probable cause to believe that AUO has violated its probation.”  The petition stated that as of March 19^th the company had only hired part-time compliance officer.   There is hearing before Judge Illston on May 1, 2015. If the company is found to have violated probation, the court could increase the length of its time on probation and increase the fine from $500 million up to a maximum of $1 billion.

• Credit for Compliance Programs

When it comes to cartels, when Brent Snyder speaks, people listen.  So, I’ll also pass on his comments on whether the Division will ever give credit to a company for having an effective compliance program. Snyder has covered this topic in previous speeches.  He again noted that at sentencing the Division has never moved for a 3-point culpability reduction under the Sentencing Guidelines because the reduction is not available when high-level personnel are involved in the crime. Snyder noted that price-fixing conspiracies usually involve not only high-level executives, but multiple layers of executives in the company. The DOJ is simply following the guidelines, as it must.  The other way the Division could take an effective compliance program into account is at the charging stage. And, Snyder did note that perhaps the door is “open a crack” to a case where a low-level rogue employee is the sole person in a company involved in price-fixing. But Snyder noted, “the lone rogue employee is something like Big Foot—often talked about but never actually seen.”

• Navigating Tricky Waters—India

I also attended a breakfast program hosted by Amarchand Mangaldas, a leading law firm in India. The program covered all aspects of the development competition law in India; abuse of dominance, merger control and restrictive agreements/cartels. Naval Chopra spoke on cartels. He noted that at the present time, the Competition Commission of India (CCI) has been focusing on trade associations, believing, that while they serve legitimate pro-competitive purposes, they also provide a forum for competitors to cooperate on anticompetitive agreements. Mr. Chopra also noted that the CCI has brought actions against individuals who can receive substantial fines. Also, Mr. Chopra noted that the Competition Appellate Tribunal (COMPAT) and the Supreme Court of India have begun to issue opinions that are giving shape to, and in some cases limiting, the power of the CCI.

Thanks for reading.  While I tried to capture the essence of the remarks at the meeting, this post is very brief compared to the depth of the programs.  Also, any errors or mistakes are mine.